Xaar warns again on outlook

Xaar warns again on outlook

Shares in Xaar slumped to a five-year low after the inkjet manufacturer issued another profits warning.

Xaar 1201 head: adoption slower than expected

In a trading statement issued this morning (30 August), the Cambridge-headquartered inkjet technology developer said that the outlook for the rest of the year had worsened since it warned on its first-half performance at the end of June.

The company said that underlying trading since the end of June had been “below the levels previously anticipated by the board in its announcement of 27 June” and this was expected to continue to be the case.

“Although the reception of new products has been positive, adoption of the 1201 printhead, in particular, has to date been significantly slower than expected, and the rate of decline in ceramics continues to be aggressive,” the statement said.

Xaar’s share price tanked on the news, falling by nearly 30% to 174.64p, and at one point descending to new 52-week and five-year low of 160.80p. The 52-week high is 509.05p.

The company’s difficulties over recent months have resulted in it being tipped as a ‘buy’ for bold investors by the Daily Telegraph’s Questor column, due to the potential upside if the manufacturer either returns to its previous levels of profitability or achieves its ambitious targets.

The possibility of Xaar becoming a takeover target due to its low share price was also raised.

“There is a chance of further near-term profit disappointment but Xaar could just as easily be targeted by an overseas predator on the hunt for a technology leader,” Questor said.

In its trading statement Xaar also said that a strategic review was underway for “more extensive partnering in the printhead unit”. Current partners include Xerox, Ricoh, BASF and Stratasys.

Xaar will provide an update on the strategic review and the cost-saving measures announced in June when it releases its interim results on 5 September. Sales for the half-year are expected to be around £35m (H1 2017: £44m), including £9.8m of one-off royalties.